THANKFULNESS, GRATITUDE, AND TRADING
Well, I can’t believe it. Honestly. What a ride. God is good. It’s been a fight and a struggle every step of the way but here I am. A trader. It’s funny, just saying that, it doesn’t hold the weight I thought it would. It’s like everything right? The destination always sounds SOOOO good and then you get there and realize that it still has the same problems, maybe more, not usually less, but overall it doesn’t feel a whole lot different than when you weren’t there.
Unless YOU change along the way. Then it will feel different.
That’s what this will be about. I am doing the Trading Experiment Part 2: What It’s Like as a Pro
I will do what I did before. Starting tomorrow, I am going to do 40 trading days of posts talking about things like what’s my trading like now, what was the journey like, and what has changed since those good old days when I had to fight for every inch. Hahaha. I guess I still have to fight for every inch so maybe not much has changed.
WHAT HAVE I BEEN UP TO?
I have to say, I have gotten to do some cool things on this journey:
- Speak at 2 Rob Booker Live events
- Be a guest on Dale Pinkerts FXStreet show twice
- Write an Amazon #1 book
- Start a trading website
- Most of all, consistently make money as a trader
So starting tomorrow, it’s on again. I had a friend remind me of my journey today and I got a whole bunch of good feelings about writing all of those posts that it made me want to immediately jump in and do it again. I am so excited.
Talk to you tomorrow.
Day 1: Here We Go Again
THE TRADING EXPERIMENT
I am so excited to be doing this again. I am going to write for 40 days and talk about what the journey was like to turn pro and to still be working through turning ummm “more pro” I guess? The ups, the downs, and the consolidation periods. I want to try to put the process in perspective a little bit maybe in hopes helping your journey.
Today I wanted to discuss what it’s like going back and looking at the experiment and how I want the next 39 trading days to play out. I honestly haven’t looked at it in months, maybe years.
Maybe in some ways I have forgotten where I’ve come from and I think that may be dangerous because if we lose that perspective, we are never content because we always feel like we aren’t “there” wherever there is. I’m not this or I’m not here. Well, look back. Have you made progress? Then you are getting there. You are on the path. You are taking the journey.
Ok it’s time. I am going to sit and read my posts again right now and I will come back and talk about it.
(I will be back in a while. Feel free to get a soda or some coffee. I might be a while)
Ok I’m back. Sorry to keep you waiting.
What a trip. I am very glad I have that record of my journey. It’s lacking in trading depth and knowledge because, well, I was lacking in trading depth and knowledge so that makes sense. It’s got some good stuff though and I am very proud that I did it and I know that it’s one of a hundred small steps to get me to where I am today. It was my journey to grow up maybe more than become a trader.
I have been trying to think about what’s different now. What changed? What can I pass along in the next 40 days that would help the next person make the journey.
The dirty little secret is this:
TRADING ISN’T HARD. I WAS MESSED UP AND MY MIND NEEDED SOME WORK
It was true for me then. It’s true for you if you are not trading successfully right now. It’s not a problem with the charts or what you know. Price only goes up or down. It’s a problem in the emotional and physical processes that connect you to trading. Your demons if you will…
I am laughing to myself as I think about all of the emotional turmoil I and others have gone through over something so simple as “price moves up and down”.
WHAT DO I WANT TO ACCOMPLISH HERE?
Maybe I want to leave my version of a “map” or something like that. The things about my mind and my attitude and my discipline that had to change to get me here.
It’s kind of like the explorers from history class. Lewis and Clark maybe. They set out on a perilous journey up the Missouri River into the unknown and had to fight battles they didn’t know even would exist. They faced fear and danger and lived to tell about it. But the translation of that story will never do the actual journey justice. I will never be able to tell you what I’ve gone through or how I’ve grown up and changed through this or what it’s taken to get here. I can’t draw you your map or mark the pitfalls for you. Well I can, but you won’t listen and that’s ok. Maybe that’s how it’s supposed to be.
But I guess I will try. I will tell the second half of my story. The part where I win. And maybe it will help you in some way.
Talk to you on Monday
Day 2: Thoughts on Full Time Trading
I was thinking a lot about this over the weekend. I have 40 days of writing to do and I try not to think as much as I used to and be a bit more of a doer so I may have bitten off more than I can chew here.. haha. We will see.
I wanted to do a piece on some of the differences in my perceptions of trading, professional trading, full time trading, and consistent profitability. I probably won’t cover all of those topics today but look for them in upcoming posts.
Today I am going to talk about what is different about my thinking on being a “professional trader”.
It’s blown way out of proportion… WAY out.
Am I talking about the freedom? na. That’s pretty awesome.
I’m talking about the idea that it’s a better “job” than any other. Is trading any more rewarding than digging ditches? or building a house? or making a cold call? or whatever it is that you are diligently working at today to provide a life?
No. It isn’t.
It’s a job. What makes the job is the person, not the other way around.
I guess I knew all along that this was the case but I didn’t want to accept it. I wanted to think that when I made it, I would then be a better person because my circumstances where better.
Again, not really the case.
18 months into trading as a “professional” and I still have a lot to learn about patience and discipline and how this business actually works. But I have come so far. Am I a better person because I am trading for a living? No. I am able to trade for a living because I have allowed this process to shape me and move me where I needed to go. Not very willingly I will admit but every time I just accept that this is how it is, stop fighting it and trying to do it my way, only then can I actually take a true step forward.
Life is kind of funny that way. It never goes the way we want but more the way it always should.
So to sum it up, don’t be in a hurry to change. I understand there are certain circumstances that force change. There is nothing you can do about that. I’m talking about the way I forced my hand. It’s not necessary, unless your a hard headed stubborn animal like me. Being a pro full time trader isn’t anything like fast money portray’s it. I promise. (Unless you get a job on Fast Money.. Then it’s probably a lot like Fast Money). But I didn’t. I still live a quiet life with my family and have needs that need to be met. I eat what I kill and I go with the flow.
Don’t rush your process. It will come to you if you let it. I kind of wish I would have done that more so that’s why I’m passing this post along to you.
If you have any questions about going full time, or how to allow the process to come, reach out to me. firstname.lastname@example.org
Have a great day
Day 3: Turning Pro Revisited
I wanted to take some time today to revisit one of my the single best articles I have ever read. It was, quite literally, one of the biggest influences on the experiment. It is Steven Pressfields’ article on Turning Pro. I ended up reading the book like 10 times over the years just because it’s so practical and relevant to every stage and step of the journey. You can read the article HERE
“When we talk about the switch from the mindset of the amateur to the mindset of the professional, we’re talking about a total, fundamental, life-overthrowing revolution.”
When we set out to accomplish something, anything really, we are supposed to count the costs and plan the journey to the best of our ability.
But how do you actually plan for total, fundamental, life-overthrowing revolution?
Simply… You don’t. It’s impossible.
So you jump
Total, fundamental, life-overthrowing revolution is not cheap. Sure it’s free for you to take but it costs you so much to put into practice. In all reality, this journey was just to get me to the foot of the mountain of the revolution. I still probably have some of the most challenging yet rewarding parts of the journey ahead of me.
IS IT ABOUT TRADING?
When I wrote my post on turning pro (HERE) I thought it had EVERYTHING to do with the actual trading. Things like learning about charts, learning about indicators, learning about systems and all that other stuff. I wanted to be a great trader! Hear me ROOOARRR… did you hear that? That was a real roar from a real trader… Impressive huh?
But I missed the real point. I missed the climax of the story.
“The person who is going to change is going to change anyway. She has no choice. She is impelled by inner necessity. While the person who is not going to change is not going to change no matter how many seminars or retreats she attends or how much money she pays to those who promise to help her make the change.”
The inner necessity of the change is what was driving me. Not the need to be a trader. I really really really thought that was it but actually the need to become the man and husband and father and friend and coach and ,yes, last but not least, trader I really deep inside of me wanted to be was the true catalyst.
I wanted to change. Plain and simple
I wanted to turn pro. I couldn’t stand the sight of myself in the mirror any more because I knew I had more to give. I had more inside of me than what I was giving. I slacked off in places that needed meticulous detailed focus. I didn’t complete tasks I said I would (I am still working on this one). But I wanted to change. That was the real point of turning pro.
The fire and determination and perseverance in the face of all resistance is what turning pro is really about. Not being a consistently profitable trader.
That comes after you do the work on your mind and on your body and on your words you speak and the beliefs you hold and the actions you choose to take or not take.
I promise. It’s worth it.
“I know how hard it was. I know the price you paid. I know the guts it took. I know how scared you are, and I know how weird and alone it feels.”
Well, no one may ever really know my price just like no one will ever know your price. That’s ok. It’s not for anyone else to know. But it cost me dearly and it will cost you. But again, it’s worth it.
Have a great day everyone.
Day 4: What Does a Trader Need?
I have been thinking a lot lately about character traits that are import for successful traders to have and live out. There are many but I will use this post to discuss the one that I have come to regard as the highest and most important of them all.
Before I go any further, you should answer this question for yourself…
What is the most important character trait of the people I see as successful traders?
And then maybe an add on question for those that can stomach it:
Do I have that?
That’s the one that will sting probably.
I want to spend a few lines talking about the one that I see as most important. It’s simply this:
The ability to defer gratification
Simple right? Don’t eat that second doughnut. Don’t drink the second beer. Don’t have the desert and the soda.
It sounds simple but it instant gratification is one of the single biggest killers of a trading accounts I have ever come in contact with. It devours good traders and leaves them to rot.
Why? So what if I have that second doughnut? That is not my trading problem…
I can hear it now.
Well, then why do you trade so much? For the “action”? Hit a blackjack table. It’s funner and your money will go slower.
Why do you over risk? For the money? Then get a high paying job because trading won’t satisfy that itch right away. Over time it will, but not today.
If only you would realize that your mind is your greatest trading indicator…
You have to wait for it and work for and learn to control it and master the urge to trade and the urge to make money. You have to put the second doughnut in front of your face, right on your desk all day and stare at it and learn that the urge doesn’t control you, you control it.
Need more money? Stop spending so much. Defer the gratification until you make that amount in your trading account.
Being able to control the actions, and more importantly the EMOTIONS behind those actions is the single most important character trait of a trader.
I will forever compare trading to the farmer. I grew up in an agricultural background and know what it takes to get crops in. Instant gratification does not work when growing things. What are you going to do? Plant the seed and rip it up because it isn’t growing fast enough? No, at least I hope not. “Well I know the wheat plant that grows from this seed is what will feed me but I’m hungry now. I will dig up the seed and eat it.”
Ok. But you have killed that plant, but more importantly, you have killed any of the seeds that would have grown next years crop.
I grow a small vegetable garden every year to remind me about how the process works. Maybe you should too.
Also, Pressfield talked about the marshmallow experiment in Turning Pro. Look it up if your interested.
Wait for the good. It takes time to develop.
Have a great day
Day 5: Another Trader Trait
Today was a bummer. 1% loss. No money made. I hate these days. I really do. They feel like such a waste don’t they?
I took several positions in my overnight system and woke up to find a huge mess and made the decision to close them down.
I had made a few minor mistakes in analysis and position sizing so I had that feeling in my gut like dude, you are on thin ice. You better do something or this loss will be much worse. Well, I actually closed the trades at -2.9% and mitigated 1.9% of it in NY to finish with a manageable 1% loss on the day.
Had that been a couple years ago, I would have been throwing keyboards and emotionally melting down. You know, that really proud moment when, after you just lost 20%, you also have to clean your room back up and buy a new keyboard. Maybe I’m the only one I guess…
Ever been there?
Ever that feeling in your gut like you just walked into a trap and at any moment you could find your self staring at a situation you really really don’t want to deal with?
I have many many times.
But I am going to point you back to what I said a little earlier. “I made the decision to close them down”. I didn’t always do that…
That is seriously one of the biggest difference between a profitable trader and a break even or worse trader. It’s a huge difference in me these days. The ability to say no, your done. I guess it goes back to yesterday’s post as well. The instant gratification side of me says “I need this win. I don’t want a loser. I don’t want to say I had a loss for the day. I don’t want to have to answer for the loss”. That’s the selfish insecure amateur at work who is bent on your destruction. Where the pro says, ok, you are wrong. Fix it. Quickly. Don’t hesitate. Or you aren’t wrong but your neutral now and the market is now in a better position to throw a big punch. Run. Fast. Stay a pro. Stay in control at all costs.
THE DECISION PROCESS
I would say each decision to close or stay comes with a certain set of criteria I go by:
- Size of risk- Did you position size well enough to be able to allow yourself to sit through full stop outs? If yes, then you can move on to the next question. If not, kill it immediately. If risk is out of whack, you will make dumb decisions unless you take back control.
- Validity of Analysis- How is my analysis playing out? Have things changed? Sometimes my analysis doesn’t change but I know I have gone from an edge to a coin flip and that alone is enough to move me along most times. If your analysis hasn’t changed and risk is in line, you decide to stay. If not, kill it and regroup.
Those are the main two decision points when I get into a losing trade. After that I take into account the news and, like today, try to find out if it’s just some order churning to illicit trading and get people trapped for a big event tomorrow.
Did I always act like this? Did I always show calmness under pressure? Like I said before, my account and my keyboards would tell many harrowing tales.
I was THE ABSOLUTE WORST RISK MANAGER IN THE ENTIRE UNIVERSE. I will gladly admit it. I will admit that every time I took a trade I would try so hard to never lose and in the process, lose a ton. I still suck really bad at things like poker. I hate saying that. I know it’s weird they usually correlate but I suck at it. I am a horrible gambler.
“Being afraid to lose a little means your guaranteed to lose a lot”
I just quoted myself there by the way. I say that a lot.
I used to hold my losers and “hope” basically for the best. I had the gut feeling like I was in too deep, I knew the PA was changing, but I couldn’t admit the obvious and take the loss. It was not possible. I usually put myself in positions by way of risk and size that I had no choice BUT to be right. So instead I would take 3x that loss and be like well, good job Shonn. Well played. You stuck to your hope cannon and realized it was firing feathers.
And on top of that, you created a big hole that you can’t dig out of. Now I know what I can get out of in NY. I like the days much better when NY get’s to add to the days totals but if it needs to, I know what it can clean up. I don’t want a loss bigger than that. Ever.
I used to stomach so much more draw down than I do now.
I used to give the market control over my money and emotions and ask it to please be nice to me. That’s how it is supposed to be. You should be nice to me. Now, I know what the market is, and I will do everything I can to hit first and hit faster and then go sit down and let the market be pissed that it gave up some it’s wealth to me.
That’s our job. We need to be in control of our money, our risk, and our emotions. If any of those is out of sync, it will be a long day.
Have a great day.
Day 6: The Realities of a Small Account
I want to spend some time on the realities of small trading accounts today. I am no stranger to this and even know run a small portion of the money I hope to run some day. I am an expert at small accounts. It’s where I cut my teeth.
WHAT DEFINES A SMALL ACCOUNT
It’s really simple. Any account, that if it produced 5% a month would not cover your living expenses. That’s my definition.
Here’s the math:
Monthly expenses= $4000
5% of X = $4000
If you need $4000 a month and you can make 5%, if you have anything under 80k you have an account that you should not expect to pay your bills from and is “small”. There could be 100 different definitions but this is what I use.
So do I have a small account? Yep. I have to make multiple % a month to come out with what I need. So day I will be able to make 5% a month on an account and live the way I want to. But not yet.
SO WHAT IS A SMALL ACCOUNT USEFUL FOR?
The best thing to do is keep things in perspective and manage the expectations. Never mind the best, it’s the only way you will have a chance. There is a very specific purpose for a small account and it has very little to do with making money. Nothing actually.
It has everything to do with mastery, practice and skill development.
You need to learn how to manage you emotions in a trade worth $5 or $25 not $500 or $1000. If you try to work on your skill at this kind of risk you will never make it. I promise. You need to learn how to calculate pips, pip value, and contract size on a an account that mistakes cost a few bucks and not a car payment. You need to figure out how you trade best. You need practice at your craft. I firmly believe this can’t be done on a demo account with 50k. It won’t work. The return is off. What happens when you do some good things on that demo and then go back to your 5k. You won’t feel like you are making anything and you will over trade. Guaranteed. We have to feel like what we are doing is meaningful. We have to feel productive. If we make $5 a week, what the hell does that get you?? So it will feel horrible. But if you change the focus and absolutely forget the money and count the positive aspects of mastery and skill you developed that week and count the pips you were able to accumulate and then realize that pips are infinitely leveraged, you will feel like you are on the road to accomplishment.
There is an old Mel Gibson movie called “The Patriot”. There is a scene where his young boys have to help him in a battle and he asks them what he taught them about shooting. They answer “aim small miss small”.
That’s the simple truth of a small real account. Aim small miss small. Because while you learn to do that, you don’t want a small miss to cost 10%. It won’t teach you the importance of how to manage the money in the account. You will focus on the 10% loss, not the lesson. The lesson has the REAL VALUE. Because like the pip, the lesson is infinitely leveraged
“AIM SMALL MISS SMALL”
THE MENTAL TRAP
Simply put the small account is a mental trap. There are two distinct focuses in trading: Skill development and money accumulation. They are very different and should not be attempted together. While you were in college, did you think you should get paid for taking your courses? Was money accumulation your goal while you were sitting in psych 104? No. But you knew that eventually that class would be a portion of what added up to a degree so that you could have a skill that would allow for money accumulation.
THEN WHY ARE WE TRYING TO GET RICH FROM TRADING WHILE WE ARE SITTING IN PRICE ACTION 104?
Define your goals. Do you want to learn a craft? Or are you looking to the money too early? If you can stop focusing on easy cash and focus on development of a craft that probably won’t pay you any time soon, much the same as getting educated in any other field in the world, then you will have a small piece of the foundation for finding success.
You must do this. You must stop trying to squeeze your millions out of your small account and understand that money will take care of itself once you spend the time, effort, and yes tuition to the school of learning how markets function. It’s not free. It will cost you.
Be very deliberate this weekend in defining your goal. If it’s cash with no skill, you will find this very frustrating. If it’s a skill that will eventually provide more cash than you can imaging but you have to put in your time and investment, then you have a chance.
Have a great weekend everyone.